1989 (10) TMI 38 - HC - Income Tax

High Court rules against assessee in Section 10(22) case, upholding Tribunal decision.

The High Court ruled in favor of the Revenue and against the assessee in a case concerning the applicability of Section 10(22) of the Income-tax Act to a ... Charitable Purpose, Educational Purposes, Exemptions Issues Involved:1. Applicability of Section 10(22) of the Income-tax Act.2. Jurisdiction of authorities under Section 10(22) vs. Sections 11 to 13.3. Justification of Tribunal's conclusion on Sections 11 to 13 applicability.4. Impact of Section 10(22) on the jurisdiction of Sections 11, 12, and 13.Summary:Issue 1: Applicability of Section 10(22) of the Income-tax ActThe primary question was whether Section 10(22) of the Income-tax Act applied to the assessee, a public charitable trust, or if Sections 11 to 13 were applicable. The Income-tax Officer assessed the trust's income and allowed partial exemption, leading to a taxable income of Rs. 4,360. The Appellate Assistant Commissioner reversed this, granting full exemption under Section 10(22), stating the trust's primary objective was running educational institutions. However, the Tribunal found that the trust's income was derived from non-educational sources like shandai leases and cinema theatre leases, and only a small portion was spent on education. Thus, it concluded that Section 10(22) did not apply as the trust did not exist solely for educational purposes.Issue 2: Jurisdiction of Authorities under Section 10(22) vs. Sections 11 to 13The Tribunal held that the Appellate Assistant Commissioner erred in applying Section 10(22) without considering Sections 11 to 13. The Tribunal directed the Appellate Assistant Commissioner to examine the compliance with Section 11(2)(a) and (b) of the Act. The High Court agreed with the Tribunal, noting that the trust's objectives included religious purposes, which disqualified it from claiming exemption solely under Section 10(22).Issue 3: Justification of Tribunal's Conclusion on Sections 11 to 13 ApplicabilityThe Tribunal's decision to apply Sections 11 to 13 was based on the factual finding that the trust's income was not solely for educational purposes. The High Court upheld this view, emphasizing that the trust's income was used for both educational and religious purposes, thus necessitating the application of Sections 11 to 13 to determine the extent of tax exemption.Issue 4: Impact of Section 10(22) on the Jurisdiction of Sections 11, 12, and 13The High Court concluded that the applicability of Section 10(22) does not oust the jurisdiction of Sections 11, 12, and 13. Since the trust did not exist solely for educational purposes, the income had to be assessed under Sections 11 to 13. The High Court affirmed the Tribunal's decision and directed the Appellate Assistant Commissioner to reassess the income under these sections.Conclusion:The High Court answered the reference in the affirmative, favoring the Revenue and against the assessee. The court upheld the Tribunal's decision that Section 10(22) did not apply and directed the assessment under Sections 11 to 13. The assessee was ordered to pay the costs of the Revenue, with counsel's fee set at Rs. 500.